Enbridge Sells New Canadian Crude Grade To US, But No One’s Buying

Enbridge Inc has started offering the shipping of a new Canadian crude blend via pipeline to the U.S., but no refiner has bought any amount of the new grade so far, due to uncertainties over quality and price and how it would be affected by commingling with other types of crude oil shipped by the same line.

According to trading sources quoted by Reuters, Enbridge has been offering shippers since the end of last year the option to ship a new blend, Canada Heavy Sweet (CHS), on the company’s Line 3, which has the capacity to ship up to 390,000 barrels per day of mostly light crude grades from Alberta, Canada, to Superior, Wisconsin. Line 3 is currently being used below its capacity, and Enbridge’s offer to ship more of the heavy sweet grade is an attempt to alleviate congestion at the 2.85-million-bpd Mainline, which carries most of the Canadian exports to the US, Canadian traders told Reuters.

According to trading sources, it was BP that had suggested the light sweet-heavy crude blend to Enbridge. The blend could be used at BP’s large refinery in Indiana, Reuters sources say.

BP’s Whiting refinery in northwest Indiana has a production capacity of 430,000 bpd and is equipped to process increased amounts of heavy crude oil, according to BP’s website.

However, no refiner has acquired Canada Heavy Sweet so far, although some have inquired after the grade, a source at a Canadian oil logistics company told Reuters. Apart from uncertainties over the quality and costs for refining the new blend, refiners would also need cheaper prices.

The lack of enough capacity to export crude and the more expensive oil sands projects have further widened the discount at which Canadian oil trades to WTI. Most recently, Norway’s Statoil said it was selling its oil sands projects, citing profitability concerns.

At the end of November, Canada’s Prime Minister Justine Trudeau conditionally approved two new pipeline projects that are expected to increase Canada’s export capacity via pipeline as oil sands production grows.